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Replication Files for: The Cost-effectiveness Implications of Carbon Price Certainty

Version
1
Resource Type
Dataset : aggregate data, event/transaction data, program source code
Creator
  • Aldy, Joseph E. (Harvard University)
  • Armitage, Sarah (Harvard University)
Publication Date
2020-09-14
Free Keywords
instrument choice; investment under uncertainty; climate change; carbon tax; cap-and-trade; tradable performance standard
Description
  • Abstract

    While a firm knows the carbon price with certainty under a tax, it must form an expectation about future allowance prices to identify its cost-effective abatement investment under a cap-and-trade program. We illustrate graphically how errors in forming this expectation increase the costs of irreversible pollution abatement investment under cap-and-trade relative to a tax. We describe empirical “cost-effectiveness anomalies” in allowance markets that may be attributed to cap-and-trade’s inherent uncertainty. We model investment under simulated U.S. carbon tax and cap-and-trade policies and find that allowance price uncertainty can increase resource costs 20 percent for a given quantity of emission abatement.
Temporal Coverage
  • 2008-01-01 / 2018-12-31
    Time Period: Tue Jan 01 00:00:00 EST 2008--Mon Dec 31 00:00:00 EST 2018
Geographic Coverage
  • United States
Availability
Download
This study is freely available to the general public via web download.
Relations
  • Is version of
    DOI: 10.3886/E120599
Publications
  • Aldy, Joseph E., and Sarah Armitage. “The Cost-Effectiveness Implications of Carbon Price Certainty.” AEA Papers and Proceedings 110 (May 2020): 113–18. https://doi.org/10.1257/pandp.20201083.
    • ID: 10.1257/pandp.20201083 (DOI)

Update Metadata: 2020-09-14 | Issue Number: 1 | Registration Date: 2020-09-14

Aldy, Joseph E.; Armitage, Sarah (2020): Replication Files for: The Cost-effectiveness Implications of Carbon Price Certainty. Version: 1. ICPSR - Interuniversity Consortium for Political and Social Research. Dataset. https://doi.org/10.3886/E120599V1